Gaming supplier International Game Technology, despite reporting quarterly net income that was flat compared to a year ago, is drawing “buy” recommendations from several slot analysts, who predict a rise in earnings thanks to improved cash flow.
“We view the strong 2Q18 results as indicative of the solid fundamental trends in both slot machines and lottery, despite currency headwinds,” wrote Jeffries analyst David Katz in a note last week. “Our outlook remains that the slot turnaround story coupled with the stable, but growing lottery business results in an attractive level of free cash flow which becomes a focal point in 2019 and 2020. We view the current 7.8X 2019E EBITDA as attractive relative to other names in our coverage.”
IGT reported second-quarter results showing adjusted net income of $264 million, or 24 cents per share, compared with $264 million, or 15 cents per share, a year ago. Revenue fell 1.6 percent to $1.2 billion. However, the figures topped analyst estimates for the period.
“We believe most were not expecting for the company to maintain guidance for the year, which as they mentioned will experience a $26 million negative translational impact versus their prior guidance, given the decline in the euro versus the U.S. dollar,” Macquarie Securities gaming analyst Chad Beynon told investors in a research note.
During a conference call with investors to accompany the results, CEO Marco Sala said higher-than-expected same-store lottery growth in Italy (3.5 percent) and in North America (a 4.2 percent jump) lifted EBITDA.
“We are encouraged that much of that (North America) growth is coming from the largest lotteries, such as California, Texas and Michigan,” Sala said.
